Italy's Five Star Movement votes in favour of coalition

The move should pave the way for new government

Luigi Di Maio, the head of the Five Star Movement and deputy prime minister in the previous administration. AFP

Members of Italy's anti-establishment Five Star Movement overwhelmingly backed a proposed coalition with the centre-left Democratic Party (PD) on Tuesday, opening the way for a new government to take office in coming days.

In an online ballot, 79.3 per cent of Five Star supporters voted in favour of joining forces with the PD, their long-time political adversary, party leader Luigi Di Maio said.

The vote means Prime Minister Giuseppe Conte can now complete work on the new administration and present President Sergio Mattarella with a list of suggested ministers.

He is likely to go to the president's palace to update Mr Mattarella on his progress on Wednesday, a political source said.

"I am very proud of today's vote and very proud of the government that is to come," Mr Di Maio said after about 80,000 ballots were counted, easily beating Five Star's record for its frequent online ballots.

"This government will be neither on the left or on the right. It will be a government that does the things that need doing."

The PD's decision to go into coalition with Five Star did not require a vote by its rank and file.

When Mr Mattarella has agreed to Mr Conte's Cabinet, the prime minister will have to win confidence votes in both houses of Parliament before the government can officially start work.

The key post of economy minister may go to Dario Scannapieco, a former Treasury official who is vice president of the European Investment Bank, or the PD's Roberto Gualtieri, now head of the European Parliament's economic affairs commission.

Another name being considered for the job is former Bank of Italy deputy governor Salvatore Rossi, sources said.

Mr Di Maio, who served as deputy prime minister, industry minister and labour minister in the previous administration of Five Star and the hard-right League, may become foreign minister in the new government, the sources said.

Earlier in the day, Five Star and PD unveiled a shared, 26-point policy programme for their mooted coalition, putting an expansionary 2020 budget at the top of their agenda.

Five Star, created a decade ago out of opposition to the PD, agreed to form a new administration to head off a snap election after its coalition with the League collapsed last month.

Italian benchmark 10-year bond yields hit record lows on Tuesday in a sign that investors believed the new administration would take office, averting the risk of prolonged political instability.

"The results are quite strong," said Chris Scicluna, head of economic research at Daiwa Capital Markets in London.

"This is the kind of result that is going to give investors confidence in the new coalition, at least for the next few months, and in its ability to deliver a budget that is likely to be challenging."

Five Star and PD said they would use the coming budget to help the stalled economy grow, but also promised that they would not endanger public finances.

Italy has the second-largest debt burden in the EU as a proportion of economic output, and the coalition called for greater flexibility from Brussels to overcome the "excessive rigidity" of existing budget rules.

Emphasising social justice, the two parties pledged to introduce a minimum salary, avoid a VAT rise set for January and boost spending on education, research and welfare.

The programme also called for a web tax on multinationals and the creation of a public bank to help boost development in the poorer south.

Five Star and PD committed to rewriting Italy's conflict of interest laws, a move that former prime minister Silvio Berlusconi always sought to avoid, fearing it could harm his Mediaset media empire.

The two parties also promised a "revision" of Italy's motorway concessions.

The vague wording left hope for Italian motorways operator Atlantia that Five Star would not press its demand that the company lose its lucrative toll road concession after last year's deadly bridge collapse in Genoa.